Draw the payoff diagram for the following questions (Put-Call parity) + =...
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Draw the payoff diagram for the following questions (Put-Call parity) + = + 0
a. Suppose you short the Nokia stock for $100 and buy a 105-strike call. Construct payoff and profit diagrams for this position. Verify that you obtain the same payoff and profit diagram by present value of borrowing $105 and buying a 105-strike put.
b. Verify that you earn the same profit and payoff by (a) buying the Nokia stock for $100 and (b) buying a 95-strike Nokia call, selling a 95-strike Nokia put, and lending $ present value of $95. Prepare an algebraic table showing the payoff of this position at expiration under different scenarios.
Please do in Excel and show cell formulas thanks!
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